Has a Missile Defense System Ever Not Caused Tension?

After hesitating for several years, South Korea decided to let the US-made Terminal High Altitude Area Defence (THAAD) anti-missile system be deployed in North Gyeongsang Province. Seoul and Washington say the deployment is only targeted against North Korea, but the ability of the radar system to detect and track Chinese strategic missiles could pose a serious threat to China’s nuclear deterrent. Without a downgrade of capabilities, a fully operational THAAD will likely sour Sino–ROK relations and trigger an expansion of China’s nuclear arsenal.

A Heavy Pound

In an otherwise uneventful foreign exchange market, sterling's slide for its fifth consecutive session is the highlight.  It was pushed below $1.30 for the first time since July 12.  Initial resistance for the North American session is seen near $1.3020, while the $1.2960 area corresponds to a minor retracement objective. 

Sterling has been sold-off since the middle of last week.  Today's data may have simply provided a little more ammo for what the market was already doing.

Pre-weekend Equity Rally Shows Increased Risk Appetite

Investors favor risk assets today.  Global stocks are moving higher in the wake of the pre-weekend US rally that saw the S&P 500 close at record levels.  Bond yields are mostly firmer, again with US move in response to the robust employment report setting the tone in Asia.

European bonds participated in most of the pre-weekend move and are consolidating today with a slightly heavier tone.  UK Gilts are outperforming, with a new record low of 64 bp on the benchmark 10-year issue. 

The Macroeconomic Picture Comes to the Fore

The drip-feed of high frequency economic data from the major economies slows in the week ahead. The data that is reported is unlikely to have much impact on the expectations of policy going forward.

The state of play is fairly straightforward.  The Federal Reserve is finding it difficult to take the next step in the normalization of monetary policy.  According to Bloomberg calculations, the Fed funds futures strip does not show greater than a 42% chance of a rate hike at any meeting through the end of next year. 

Trump and South Korea...Unraveling the Raveled?

The Republican and Democratic National Conventions have confirmed that each presidential candidate has very different foreign policy outlooks. At the heart of each platform are different fears, threat perceptions and understandings of the United States’ place in the world — including its commitment to its treaty allies.

At Least the U.S. Created Jobs...Canada, not So Much

The market's angst over the underlying trend in the US labor market eases with the help of the second consecutive robust report.  The 255k rise in non-farm payrolls was well above expectations, and the details were mostly favorable. There were upward revisions to the May and June reports. 

The BOE Makes a Widely Anticipated Cut, and can Cut Again

Sterling has slumped two cents in the wake of the Bank of England's announcement.  It cut the base rate 25 bp and announced a resumption of its asset purchase program.  It will buy GBP60 bln of Gilts and added corporate bonds to its purchase plan, which will be completed over the next six months.  Corporate bonds will initially account for up to GBP10 bln asset purchase.

The U.S. Jobs Backstory

The focus is squarely on the US employment data today, ahead of which the capital markets are mostly consolidating yesterday's Bank of England inspired moved. The Australian and New Zealand dollars, alongside sterling, which is up about half a cent after losing two yesterday. 

Today is the BOE's Day to Surprise or Disappoint

The Bank of England owns today, though tomorrow will be about the US jobs report. The BOE disappointed the market last month by not immediately responding to the UK referendum.  It had laid out a somber economic and financial scenario as a risk case if the UK chose to leave the EU. At the time, and even after the referendum, some accused Carney of being too partisan.